Estate of Goldstein v. CIR

• Decision Date: 18 June 1973
• Docket Number: No. 72-1319.,72-1319.
• Citation: 479 F.2d 813
• Parties: ESTATE of William GOLDSTEIN, De-ceased, Thelma Zelinger, Executrix, Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

479 F.2d 813 (1973) ESTATE of William GOLDSTEIN, De-ceased, Thelma Zelinger, Executrix, Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Appellee.

No. 72-1319.

United States Court of Appeals, Tenth Circuit.

June 18, 1973.

Gilbert Goldstein, Denver, Colo. (Hoffman, Goldstein & Armour-P.C., Denver, Colo., on the brief), for appellant.

Richard Halberstein, Washington, D. C. (Fred B. Ugast, Acting Asst. Atty. Gen., Meyer Rothwacks, Ernest J. Brown, Richard Halberstein, Attys., Tax Div., Dept. of Justice, Washington, D. C., on the brief), for appellee.

Before JONES^*, SETH and HOLLOWAY, Circuit Judges.

JONES, Circuit Judge:

William Goldstein, a resident of Denver, Colorado, died on December 9, 1966. He left a will dated December 7, 1953, and a codicil thereto dated August 2, 1966. His will provided that, after the payment of debts, funeral expenses and other charges, the remainder of the estate should be held in trust with income payable to his wife, Elizabeth Goldstein, for life with a direction that the trustee should pay to her from principal such sums as were necessary for her support. By the will the testator named David Goldstein as executor and trustee. The codicil substituted Thelma Zelinger as executrix and trustee. On January 3, 1967, the will and codicil were admitted to probate and Thelma Zelinger qualified as executrix. Prior to her husband's death Elizabeth Goldstein had suffered several strokes which rendered her physically incapacitated and mentally incompetent. She was never judicially determined to be incompetent and no guardian was ever appointed for her.

The statute law of Colorado gives to the surviving spouse of a testate decedent the option to take one-half of the decedent's estate. It is provided that the option be exercised by filing a written election within six months after the probate of the will. The failure to exercise the option within the six months period shall, by the terms of the statute, "be conclusive evidence of the consent of the surviving spouse to the provisions of such will." There is a provision that the personal representative, which is defined to include a guardian or conservator, of an incompetent surviving spouse is under a duty to report to the court which, after a hearing, and within six months after probate of the will, shall make an election on behalf of the surviving spouse to take under the will or under the statute. The court is authorized, for cause shown and after notice and hearing, to extend the time for exercising the option to elect for an additional six months period. Colo.Rev.Stat. § 153-5-4.

On April 3, 1967, three months after the will was admitted to probate, the executrix petitioned the probate court for authority to use estate funds for the care of her mother, Elizabeth Goldstein. The executrix filed a Colorado inheritance tax return and paid tax on the basis of a life estate to her mother and a remainder interest in herself in her own right.

Some time prior to March 8, 1968 David Goldstein, a nephew of the decedent who was originally named as his executor and trustee, visited Elizabeth Goldstein and attempted to discuss with her the option to elect to take under or against the provisions of the will of William Goldstein. She was unable to comprehend the explanation given to her and unable to make any decision with respect to the election. She finally told her husband's nephew David to do whatever he thought best for her. On March 8, 1968 David Goldstein as next friend of Elizabeth Goldstein filed in the probate court a petition which, among other things, contained the following:

"5. That the said Elizabeth Goldstein suffered a stroke in or about 1958 and since has been and now is physically incapacitated, partially paralyzed, unable to walk, and mentally restricted, although she has not been adjudicated a mental incompetent.

"6. That the said Elizabeth Goldstein had no knowledge or understanding of the time in which to elect pursuant to said 153-5-4, C.R.S., 1963, as amended, and having been advised of such right does desire this Court enter such Petition for election, and requests further that this Court enter an Order allowing her to take and receive one-half of the Testator\'s Estate as provided in Section 153-5-4, said Order being entered nunc pro tunc June 9, 1967.

"7. That the Petitioner further alleges that said failure to file the Petition was without fault of Elizabeth Goldstein and that due to her mental and physical condition said Elizabeth Goldstein was unable to make a prior prudent determination concerning said election."

On the same day there was filed in the probate court an instrument signed by Elizabeth Goldstein petitioning the court to enter an order requested by David Goldstein and waiving any notice relating thereto. A hearing was held before the probate court at which David Goldstein testified concerning the physical disabilities and the mental incapacity of Elizabeth Goldstein. The court entered an order on the same date as follows:

"1. That Elizabeth Goldstein is the widow of William Goldstein, deceased.

"2. That the said Elizabeth Goldstein is entitled to take and receive one-half of the Testator\'s Estate as provided in Section 153-14-10, C.R.S., 1963.

"3. That the failure of Elizabeth Goldstein to file a Petition at an earlier date was without the fault of Elizabeth Goldstein, and that the same was caused by and the result of her physical incapacity and mental condition.

"4. That the allegations of the Petition are true and that the determination of Elizabeth Goldstein to take and receive one-half of the Testator\'s Estate is a prudent determination.

"WHEREFORE, IT IS ORDERED, ADJUDGED, AND DECREED that the option of Elizabeth Goldstein to take and receive one-half of the Testator\'s Estate as provided in said XXX-XX-XX is hereby ratified, approved, and confirmed, and IT IS SO ORDERED nunc pro tunc June 9, 1967."

On March 8, 1968 the executrix filed the Federal estate tax return claiming the marital deduction of one-half of the decedent's estate. The Commissioner of Internal Revenue disallowed the deduction except as to the value of insurance policies on the decedent's life payable to his widow. A deficiency was assessed on December 23, 1969. The executrix filed a petition with the Tax Court for "redetermination of assessment." Mrs. Goldstein died before the matter was tried in the Tax Court.

In the proceedings before the Tax Court the physical and mental condition of Mrs. Goldstein was established and it was proved that she could not understand the making of an election to take under the statute and against the will of her husband at any time following the husband's death. The Tax Court held that the nunc pro tunc order was not permitted by the law of Colorado. The two 6-month statutory periods terminated on January 3, 1968 more than two months prior to the entry of the nunc pro tunc order. The decision of the Tax Court was in favor of the Commissioner and held that the deficiency was proper. The estate has brought the matter before us for review. The issue here is whether the order electing against the will is valid.

Although the Federal law fixes the Federal tax incidences of property transfers generated by death, it is the state law that determines the nature of such transfers and the manner by which they are effected. Burnet v. Harmel, 287 U.S. 103, 53 S.Ct. 74, 77 L.Ed. 199; United States v. Mitchell, 403 U.S. 190, 91 S.Ct. 1763, 29 L.Ed.2d 406. Since there is no decision of the Supreme Court of Colorado which is controlling upon the issue here presented and no well settled precedents of less authoritative tribunals, we are to determine as best we can the Colorado rule which should be applied in answering the question posed by this appeal. Commissioner v. Estate of Bosch, 387 U.S. 456, 87 S.Ct. 1776, 18 L.Ed.2d 886.

The Tax Court, in its opinion relied upon Sheely v. Sheely, 102 Colo. 194, 78 P.2d 378, decided in 1938, to sustain its conclusion that the Goldstein marital deduction should be disallowed. The factual situation in the Sheely case was quite different from the case here. In Sheely the decedent's widow, about ten months after the probate of her husband's will, filed a petition in the probate court attempting to elect to take against the will and under the statute. She asserted that she had been induced by undue influence and fraud to postpone her election until after the expiration of the 6-months period. The Colorado trial court resolved the fact issues of fraud and undue influence against the widow and the Colorado Supreme Court held that this finding was binding upon it and upon the widow.

In its opinion the Colorado court stated:

"We know of no valid reason for regarding the provision as merely directory. To do so would apparently violate the emphatic language used, and be equivalent to judicial legislation, which is beyond our lawful power." 78 P.2d at 379.

This dictum, and such it clearly is, was modified by the statement that "the question whether undue influence or fraud can ever repeal or suspend the statutory limitation of six months for filing a widow's election is not before us." Id.

Dicta alone, while entitled to consideration, is not of itself an authoritative expression of the law of the state. 1A Moore's Federal Practice 3313, Par. 3.07 2. Three of the seven judges of the court deciding the Sheely case concurred in the trial court's ruling on the widow's election but dissented as to the remainder of the opinion. This results in a further dilution of the persuasive effect, if any, of Sheely.

The Sheely case refers to the "statutory limitation of six months." In a later decision it was stated that "legislative acts of this character are simply statutes of limitation fixing a definite time after which an election, if filed, cannot be considered." In re Stitzer's Estate, 103 Colo. 529, 87 P.2d 745.

It is appropriate, then, to consider whether the statutory period of six...